The lure of cut-rate financing sent customers roaring into automobile showrooms as Chrysler and Ford raced Friday to match GM's ultra-low interest rates.
"It's like the good old days," crowed John Beasley, general manager of Wessen Buick in Los Angeles. Showroom traffic jumped 70% and sales at the dealership were up 40% in the last two days compared to last week, he said.
General Motors on Thursday began financing 1986 cars at interest rates as low as 2.9% for three-year loans. Then Chrysler and Ford jumped in Friday with their own cut-rate financing. Chrysler announced rates starting at 2.4% for two-year loans and 3.6% for three-year contracts. Ford is offering financing beginning at 2.9% for three-year loans.
As an alternative to the low rates, all three car makers are offering cash rebates. The new financing programs exclude some models and expire in October.
Already, car dealers are reporting considerable mileage from the bargain-basement interest rates.
At Connell Chevrolet in Costa Mesa, Norma Terriquez of Montebello admired her new red Nova while the paper work was being drawn up. On the other side of the lot, Carol Bento of Corona del Mar and her son Brandon were inspecting a Spirit. "He's not going to be 16 until February, but we thought 'what the heck,' " she said.
"I'm starting my 36th year in the car business, and I've never seen anything like it," said Bill Springett, general manager of Vicky Thomas Pontiac Yugo in Downtown Los Angeles. "People are buying cars that were maybe thinking of waiting a year."
GM said the new rates have sparked a "blockbuster" reaction across the nation, noting that the volume of loan applications at General Motors Acceptance Corp., its financing unit, is up 90% from last Friday's level. One woman in Grand Rapids, Mich., sat on the hood of a car she wanted to buy for half an hour before a Chevrolet salesperson could talk to her, the company said.
In Orange County, dealers reported record one-day sales and said they are staying open extra hours to accommodate the surge of buyers.
"It's very busy, like a zoo," said a salesman at University Oldsmobile in Costa Mesa. "I gotta go."
In a move to unload bulging inventories of 1986 cars and trucks, GM started the fire-sale round of rate cuts by offering 2.9% for three-year loans and 4.8% on the more typical four-year loan on most 1986 passenger cars and a wide range of light trucks. Or, under the program that expires Oct. 8, consumers can opt for cash rebates ranging from $300 on domestic and Japanese-built subcompacts to $1,500 on slower-selling front-wheel-drive luxury cars.
Chrysler and Ford, with smaller inventories of unsold 1986 cars, responded Friday for competitive reasons, the two car manufacturers said. "We normally would not offer financing incentives because our inventories are the best balanced in the domestic industry, but we must meet the competitive actions of others," said Ray Windecker, a Ford spokesman.
Until Oct. 12, Chrysler is offering 2.4% for two-year loans, 3.6% for three-year loans, 4.8% for four-year loans and 9.9% for five-year loans. The alternative cash rebates range from $400 to $1,500. The program also includes some 1987 luxury models, such as the Chrysler Fifth Avenue.
Grumbling From Some
Ford countered with a 2.9% rate for three-year loans, 5.9% for four-year loans and 9.9% for five-year loans, available until Oct. 8. Cash rebates range from $300 to $1,000. The program doesn't include the Ford Taurus or Sable and certain other models.
The low interest rates from car finance companies also prompted a new round of grumbling from competitors in the car loan business--primarily banks and credit unions, whose car loan rates are generally 9% or higher. Finance companies have grabbed a larger share of the car loan market over the last year because of discount programs that are "basically just a marketing gimmick," said Howard Cosgrove, a spokesman for the Credit Union National Assn.
"We have generally considered the discount finance rates to be anti-consumer because we feel the car makers are simply passing along the cost to consumers" through higher prices or other costs, Cosgrove said.
Car dealers dispute contentions that they will find other ways to make up the profit lost through lower rates.
"The price is still negotiable," said Beasley of Wessen Buick. "People are trying to find out what the gimmick is. Once they discover that there is no gimmick . . . it's translating into sales."
But the misgivings of some are not dissuading buyers who want to beat expected price increases for 1987 model cars--which will hit dealer showrooms during the next few weeks--and who want to buy big-ticket items this year before tax reform legislation eliminates the sales tax deduction next year. Also, interest deductions for car and other consumer loans will be phased out over the next five years.